Risk Disclosure Statement for Options and Other Derivative Trading
To allow the Client (“you”) to fully understand the risk associated with stock option and other derivative business such as warrants and callable bull/bear contracts (“CBBC”), Tiger Brokers (NZ) Limited (“TBNZ”/“Tiger Brokers”) has prepared this risk disclosure statement for your information. Please read carefully the following contents. In case of any question, please contact the support staff of TBNZ. This risk disclosure statement does not cover all risks and important matters in the trading of options and other derivatives. You should understand the nature of the subject to be traded and the degree of risk you are responsible for before any trading. Not all clients are suitable for participating in trading options and other derivatives, you should consider cautiously whether to participate in the trades aforesaid according to your own investment experience, financial strength and other relevant conditions.
1. Risk disclosure
1.1 Risk disclosure for options trading
(1) You should fully be equipped with the financial strength, expertise and investment experience necessary for option trading before your option trading. You should consider cautiously whether to purchase options after fully evaluating your own risk tolerance, investment experience, knowledge of the product, risk control capability etc.
(2) You should understand the basic knowledge of options, relevant laws and regulations, the rules and announcements of the related Exchange(s),as well as the rules of TBNZ before you decide to participate in any options trading .
(3) You should fully understand the characteristics of risk associated with options before you decide to engage in any options trading. Unlike stock trading, option is a financial derivative featuring gearing, time delay, co-movement and high risk. An option trade is a margin trade. An option is an exchange trade product (ETP) with high volatility. It is common to experience significant price increases or decreases in one single trading day. Options therefore expose you to higher risk. You may suffer substantial losses, which may even exceed the your account deposits.
(4) You should carefully read the terms and conditions of contract and rules associated with options to be purchased as well as the relevant responsibilities before you decide to engage in any options trading. The relevant Exchange(s) may revise the terms and conditions of contract of the option not executed in some circumstances to reflect the change in relevant rights and interests.
(5) You should understand that the risks associated with sell option trading are generally higher than the risks of buy option trading. Although the seller may obtain a premium, the seller may also suffer from loss which exceeds the premium due to the fluctuation in the price of contracted subject as the seller needs to perform the obligation of exercising. The Options market may experience less liquidity than the equity market. In instances of very low market liquidity, it is possible that enforced liquidation or execution at a very low /high price, resulting in a loss that exceeds the initial deposit.
(6) During options trading, you should pay attention to the ex-dividend and ex-right in case of dividend allocation, dividend payout, shares donation, capitalizing of common reserves, shares allocation and shares splitting or combination with respect to the contract subject. The relevant Exchange(s) will adjust the contracting parties and exercise the price of the option contract within the period of validity, and the trading and settlement of the contract will be carried out as the terms and conditions of the contract after the adjustment.
(7) The rules of options trading are complicated. Please confirm that you have fully understood the rules of options trading , and consider whether you can tolerate the risk of options investments, please also make sure that you understand the relation between the option price and the movement of stock prices before you decide to participate in options trading.
(8) You should check the terms and conditions of the options contract and the related obligations (for example, under what circumstances you may be responsible for the expiration date of the option and the exercise limit of the option). In some cases, the exchange or clearing company may modify the details of the outstanding contracts (including the option exercise price) to reflect the changes in the relevant assets of the contract. TBNZ is not responsible for any loss of trading that may result from your lack of awareness of the related rules.
1.2 Risk disclosure for warrants and CBBC in the Hong Kong Exchange
(1) Issuer default risk
In the event that a structured product issuer becomes insolvent and defaults on their listed securities, you will be considered as unsecured creditor and will have no preferential claims to any assets held by the issuer. You should therefore pay close attention to the financial strength and credit worthiness of structured product issuers before you participate in trading this kind of product.
“Issuers Credit Rating” showing the credit ratings of issuers is now available under the Issuer and Liquidity Provider Information sub-section under Derivative Warrants and under CBBCs section on the official website of HKEx.
(2) Uncollateralized product risk
There are no assets guarantee for uncollateralized structured products. In the event of issuer bankruptcy, you can lose your entire investments. You should read the listing documents to confirm if a product is uncollateralized.
(3) Gearing risk
Structured products such as derivative warrants and callable bull/bear contracts (CBBCs) are leveraged and can change in value rapidly according to the gearing ratio relative to the underlying assets. You should be aware that the value of a structured product may fall to zero resulting in a total loss of the initial investment.
(4) Expiry considerations
Structured products have an expiry date after which the product may become worthless. You should be aware of the expiry time horizon and choose a product with an appropriate lifespan for their trading strategy.
(5) Extraordinary price movement
The price of a structured product may not match its theoretical price due to outside influences such as market supply and demand factors. As a result, actual traded prices can be higher or lower than the theoretical price.
(6) Foreign exchange risk
Your trading structured products with underlying assets not denominated in Hong Kong dollars are also exposed to exchange rate risk. Currency rate fluctuations can adversely affect the underlying asset value, also affecting the structured product price.
(7) Liquidity risk
The Exchange requires all the structured product issuers to appoint a liquidity provider for each issue. The role of liquidity providers is to provide two way quotes to facilitate trading of their products. In the event that a liquidity provider defaults or ceases to fulfill its role, you may not be able to buy or sell the product until a new liquidity provider has been assigned. There is no guarantee that the you could be able to buy or sell the structured product at the target price.
(8) Additional Risks Involved in Trading Warrants
i. Time delay risk
In the normal course of events, the value of a warrant will decay over time as it approaches its expiry date. Warrants should therefore not be viewed as long term investments.
ii. Volatility risk
The price of warrants can increase or decrease in line with the implied volatility of underlying asset price. You should be aware of the underlying asset volatility.
iii. Market risk and turnover
The price of warrants is also affected by its supply and demand in the market in addition to basic factors that decide the theoretical price of the warrants, in particular when the warrants are about to be sold out or new warrants are issued by the issuers. The turnover of warrants should not be considered as the basis of its value increase, and the value of warrants is also affected by other factors, such as the price of relevant assets and volatility, remaining time, interest rates and expected dividend.
(9) Additional Risks Involved in Trading CBBCs
i. Mandatory call risk
Your trading CBBCs should be aware of their intraday “knockout” or mandatory call feature. A CBBC will cease trading when the underlying asset value equals the mandatory call price/level as stated in the listing documents. Youwill only be entitled to the residual value of the terminated CBBC as calculated by the product issuer in accordance with the listing documents. You should also note that the residual value can be zero.
ii. Funding costs
The issue price of a CBBC includes funding costs. Funding costs are gradually reduced over time as the CBBC moves towards expiry. The longer the duration of the CBBC, the higher the total funding costs. In the event that a CBBC is called, you will lose the funding costs for the entire lifespan of the CBBC. The formula for calculating the funding costs are stated in the listing documents.
iii. Trading close to the call price
When the price of the underlying asset is close to the call price, the price of a CBBC may become more volatile with wider spreads and the turnover may also be reduced. The CBBC may be called at any time, and the trading ceased. Since the mandatory call may not take place at the same time as the CBBC trading ceases, some trading may only be reached and confirmed by the participator of the relevant Stock Exchange after the mandatory call takes place. However, any trading being executed after the mandatory call event will not be acknowledged and will be cancelled. Therefore, you should be particularly cautious when deciding to trade CBBC at the price close to call price.
2.1 Risk disclaimer
(1) All investments are risky. The historical data of any security or financial product cannot guarantee its future performance or return. Although diversified investment can help you spread risks, it does not help you to benefit or prevent you from losing money in a depressed market. There will always be potential losses in investing in securities or financial products. You need to consider your own investment objectives and risk tolerance before investing. When you use this product, it means that you have read, understood and accepted all the contents of this disclaimer, and that you have fully understood the possible risks and agreed to assume all the risks involved in using this product. You shall be clear that the use of this product does not completely avoid investment risks, and TBNZ does not take any responsibility for the losses and risks of your investment option interest.
(2) TBNZ and its affiliated companies will make every effort to ensure the authenticity, sufficiency, reliability and accuracy of the information provided, but they cannot guarantee its absolute reliability and accuracy. All the information, data and material provided by TBNZ will only be used as reference. You must carefully judge the accuracy of market prices, charts, comments and purchases or other information displayed in this product. TBNZ will not take any responsibility for any loss caused by inaccuracy, omission of any content or your subjective reasons.
(3) To the maximum extent permitted by applicable laws, TBNZ shall not be liable for any loss or risk arising from the use or inability to use this product, including but not limited to direct or indirect personal damage, loss of business profits, interruption of trade, loss of business information or any other economic loss.
(4) Trading in markets in other jurisdictions（including those with formal links to the local market）may involve additional risks. According to the regulations of these markets, the degree of protection you may have may vary or even decrease. Before proceeding with the transaction, you should first identify all the rules regarding the transaction you will be conducting. The regulatory authority in your own location will not be able to enforce the relevant rules in the jurisdictions or markets of the jurisdiction in which you have executed the transaction. TBNZ is not responsible for any damage caused by the application of any rules.
2.2 Exemption of liability for user negligence or breach of contract
(1) TBNZ has the right to modify or change this disclaimer at any time, and the modified or changed terms will take effect immediately upon publication. If you continue to use this product after the disclaimer modification or change, you will be deemed to have read, understood and accepted the modified or changed terms. If you claim damages on the grounds of not reading, understanding, or accepting the modified or changed terms, TBNZ will not bear any responsibility.
(2) You must confirm that you know the functions of this product and the necessary operations to realize the functions of this product, and voluntarily choose to use TBNZ’s products and related services according to your own needs. For any loss caused by your personal negligence or operational mistakes during your use of TBNZ’s products and related services, TBNZ will not take any responsibility.
(3) If you use this product for any illegal purpose or in any illegal way and use TBNZ’s services to engage in any illegal acts or acts causing infringement of the rights and interests of others, resulting in losses to you or third parties, TBNZ will not bear any liability for compensation.
(4) The software or program used in this product and all contents on the product, including but not limited to texts, pictures, files, information, data, product structure and product design, shall be owned by TBNZ or other rights holders who own its intellectual property rights according to laws, including but not limited to trademark rights, patents, copyrights, business secrets and proprietary technologies. If you use, modify, reproduce, publicly broadcast, convert, distribute, release, publicly publish, conduct reverse engineering, decompile or reverse compile of this product without the prior written consent of TBNZ or other rights holders, TBNZ will not bear any liability for compensation and has the right to demand that you bear the liability for infringement of intellectual property rights.
(5) If the account password, personal information and transaction data are leaked or your identity is counterfeited in the process of using this product, TBNZ will not bear any liability for compensation.
2.3 Objective disclaimer
(1) This product has been tested in detail and closely, but it cannot be guaranteed to be completely compatible with all hardware and software systems, and it cannot be guaranteed to be completely error-free. If there are incompatibilities and software errors, you can call TBNZ's customer service (400-603-7555 ) for technical support, but you cannot receive financial compensation from TBNZ.
(2) TBNZ will not be responsible for any loss caused by telecommunication system or Internet network failure, computer failure or virus, information damage or loss, computer system problems or any other force majeure reasons (such as war, communication failure, natural disasters, strikes and government actions).
(3) The service provided by this product may be interrupted or malfunctioned due to objective factors such as internet data transmission failure, interruption and delay, which causes a danger that this product function cannot be realized. Under such circumstances, if you suffer from losses due to delayed use or inability to use the services provided by this product, TBNZ will not be liable for compensation. You are recommended to take reasonable and effective protective measures when you are using this product.
(4) According to the needs of the company's operation, TBNZ will publish and reprint the news and information provided by the cooperative company in this product and the content provider will be indicated when publishing and reprinting. Based on respect for the intellectual property rights of the content provider, TBNZ will not conduct any substantive review over or make modification of the content provided by the content provider and does not guarantee the authenticity of the content. Please make your own judgment. If you think some content involves infringement or misrepresentation, please report your opinion to the provider of the content.
This Risk Disclosure Statement shall be made in both English and Chinese. In case of any discrepancies between the Chinese version and English version, the English version shall prevail.